Sba Drive-by Appraisal Request

[George Hatch]

USPAP has never noted physical inspection to be a universally applicable minimum requirement for appraisal work. We have always performed some assignments without benefit of an interior inspection (drive-by) and some assignments without any inspection of the improvements at all (pre-construction and post-destruction).

Granted, it has not been common for clients to rely on exterior-only based appraisals for non-residential properties, but I don't think there's any more exposure to the appraiser for this than if they were doing it on residential properties. The big question has always been whether the clients understood and were willing to accept responsibility for their decision to rely on an appraisal that uses extra assumptions and has extra limitations.

 

[PL1957]

Originally posted by Andrew Picarsic@Mar 24 2005, 09:29 AM
I dont want to be combative, but I sense a certain disdain for USPAP. FTR, I dont exactly ike it, but it does at least provide an industry wide minimum standard that even inexperienced appraisers can follow with reasonable success.

I really don't have a disdain for USPAP. It is a useful document. Unfortunately, a lot of appraisers view USPAP as a "gotcha" document. The start of this thread was from a post which implied that commercial appraisers can't do drive-by's. My point was that they can and they do, with competence AND with compliance to USPAP guidelines.

USPAP, as it's written now, and even more so after proposed changes, is a flexible document providing knowledgable appraisers with a miriad of options. Unfortunately, this flexibility also leads to many appraisers taking a "chicken little" approach in that they won't do ANYTHING out of the ordinary because of a fear of USPAP violations.

"Thinking outside of the box" is a stale and meaningless cliche, but is often times necessary in order to service our clients. These clients aren't looking to pull a fast one on anybody, they're looking for products which serve their needs. If appraisers don't provide them, someone else in the market will. It is folly to expect non-licensed professionals, such as CPAs, brokers, attorneys, real estate analysts, etc. to comply with every arcane USPAP requirement because THEY DON'T HAVE TO. What kind of penalty can a state board impose and enforce on an analyst sitting in New York who is valuing property in North Carolina? Don't you think Bear Stears, Lehman Bros and other conduit lenders are doing valuations every day? Do you really think they care what the NCAB has to say?

We need to be open to the products and services we offer our clients. If we aren't, they'll just get them elsewhere.

 

[Carnivore]

George,

There in lies the real problem with less than traditional scope of work. I dont believe many clients understand or want to understand that they are assuming a greater share of the risk. This is not just new to appraisers in general, its also new to many of the clients.

The test will come when a client takes a bath and tries to mitigate the loss on the back of the appraiser.

 

[PL1957]

Originally posted by Andrew Picarsic@Mar 24 2005, 09:07 PM
There in lies the real problem with less than traditional scope of work. I dont believe many clients understand or want to understand that they are assuming a greater share of the risk. This is not just new to appraisers in general, its also new to many of the clients.

I actually think you have it backwards - the clients understand and often want less than the traditional scope of work, but too many appraisers were saying USPAP wouldn't let them provide it. AVMs, appraiser assisted AVMs and other collateral valuation products have all arisen because clients have less than the traditional scope, of course, at a lesser fee.

 

[Carnivore]

PL,

In the early beginnings of USPAP it did not allow a lot of wiggle room on scope.

Now we have a lot of freedom but the onous is still on us for providing credible results. I am all for the USPAP boys to define credible in the context of the appraisal process and place it in the definitions section of USPAP. They then could issue an appropriate Statement. I doubt they would do that so maybe we can wish for at least an AO.

So just for fun. Who does determine what a credible result will be? I am sure its the appraiser. Later on it will be two blue suits in front of a black robe.

I guess my point is that we are not(added as correction) relieved of any responsibility per USPAP. I suppose one could try and get a Cleint to agree to a stated margin of error in the form of a percentage, i.e. 1 to whatever percentage up to 100.

 

[PL1957]

Originally posted by Andrew Picarsic@Mar 25 2005, 05:58 PM
So just for fun. Who does determine what a credible result will be? I am sure its the appraiser. Later on it will be two blue suits in front of a black robe.

I think the ONLY party that can determine whether an appraisal is credible is the user of the appraisal, the client. Only the client can determine if the appraiser has produced a product that meets their needs.

Of course, I'm referring to legitimate need, not needs such as "assisting the client in the commission of a fraud"

 

[Carnivore]

Funny how stuff happens around here and things can be so coincidental.

Heres an example of a pending residential assignment that I may or may not accept, based on several factors. I dont have all the details, but I suspect that it may be for a possible offer to purchase or for assett discovery. I am competent and qualified as this is a market niche I pursue vigorously and work in at every chance.

Initial phone call with clients rep indicated a 2055 drive by. As you can see the property is currently offered for sale. I told the client I may or may not want to use the 2055 exterior format as its use is limited to mortgage lending for the GSE's. This clearly is not a GSE loan. Already I have problems. I am speculating, but past experience with other similar assignments says they dont want the seller to know there is some form of interest in the property.

Now all I have to do is convince the client to accept a different format and my handsome fee(Which I have not proposed or even determined). I also have to draft a document for the client to accept and sign acknowledging that an exterior with EA will most likely be less than reliable than a traditional report involving a on site collection of pysical data.

This subject is only a four miles away(as the crow flies). I already have time involved(about a hundred dollars worth) and no money yet.

My point is that I believe I can conduct an off site exterior inspection and produce a credible albeit less than reliable result while staying within the NC State mandated guidelines/rules of USPAP. The problem typically is the lack of communication between the residential appraiser and the client. My experience has been that most clients use people to order appraisal products who have little to no knowledge of the process and lack the authority to change anything. Subsequently they dont call me back, they just move on to the next appraiser until they find a willing dupe.

 

[Paula Greer]

One thing that gets overlooked is the fact that for loans less than $250,000, an appraisal is not even required. It is up to the bank's internal policy to determine what documentation they want to substantiate value for a small loan. Especially with SBA that is making "small business"loans, I would bet that they don't want a 50 pound self-contained report. Heck, they are keeping appraisers gainfully employed by requesting any appraisal at all when they don't even have to have one under the federal banking regulations. :blink:

 

[Carnivore]

Paula,

Does the deminimus apply to even commercial loans?

 

[Hal Mann]

Originally posted by Andrew Picarsic@Mar 29 2005, 11:21 AM
Does the deminimus apply to even commercial loans?

Yes, it does.